Vehicle finance company fined for ‘vehicle-go-round'

Mt Maunganui finance
company MAC Warranties Ltd (MAC) has today been fined
$42,250 in the Auckland District Court for 17 breaches of
the Fair Trading Act (FTA). MAC’s director and shareholder
Alan Spiers has been fined $22,750 for a further 11
breaches.

MAC has also agreed to provide $182,000
compensation to affected customers.

The charges, brought
by the Commerce Commission, related to misleading claims
made between 2008 and 2011 when MAC repossessed and sold 79
vehicles used as security for its loans.

Under
repossession laws, MAC was required to make all reasonable
efforts to obtain the best price when it sold the vehicles.
However following repossession of each vehicle, MAC sold the
car to its sister company Mount Autos Limited (of which Mr
Spiers was also a director), implying to its customers that
it had taken reasonable steps to get the best price, when it
had not. MAC either sold the vehicles to Mt Autos at a price
it had set itself, or simply used a third party valuation
when other steps were available to get the best price.

MAC
also sold 29 of these vehicles to Mount Autos before it had
the right to do so. Under repossession laws, MAC could not
sell those vehicles until at least 15 days after debtors had
been served with a post-possession notice. This 15 day
period gives debtors the chance to catch up on outstanding
payments and get the vehicle back. In each case MAC sold
the vehicles to Mount Autos within the 15 day period.

MAC
also told two of its customers that their repossessed
vehicles were "wrecks," or had been sold to the wreckers,
when they were not. They had instead been sold to Mount
Autos which reconditioned the vehicles and on-sold them.

In delivering her decision on MAC and Mr Spiers, Judge
Cunningham accepted the Commission’s submission that this
was reckless behaviour and broke the companies own rules
regarding the valuation of vehicles.

“These
misrepresentations were important, particularly because they
were made to people on low incomes and therefore in
socio-economic groups less likely to be apprised of their
rights.”

“This sort of recklessness will not be
tolerated and will incur significant monetary penalties,”
said Judge Cunningham.

Commerce Commission Consumer
Manager Stuart Wallace said this was unacceptable business
practice.

“The credit repossession laws are intended to
ensure that businesses that seize property do so in strict
compliance with the law and recognising debtor’s rights.
The conduct of MAC and Mr Spiers fell well short of what was
required by law.”

“Making matters worse, many of
MAC’s customers were beneficiaries or on low incomes. They
may not have known their rights or have been a position to
exercise them. They would have been heavily dependent on the
accuracy of the information provided by MAC, when it was not
correct in a number of respects.”

“In some cases this
became a vehicle-go-round. Mt Autos sold cars to people who
took funding from MAC. When MAC repossessed those vehicles
they were sold back to Mt Autos and then resold to another
customer, again financed by MAC.”

“Parliament is in
the process of reforming the credit repossession laws. The
Commission is keeping a close eye on the repossession
industry, and will continue to take action where
appropriate. Penalties can be significant if businesses get
it wrong,” said Mr Wallace.

Steps have been taken to
notify all affected debtors of any compensation/account
credit due to them as a result of the conduct outlined
above. However, if any of MAC's customers are uncertain as
to whether or not their vehicle was one of the 79 to which
the prosecution related, they can contact the Commerce
Commission Contact Centre: contact@comcom.govt.nz or 0800 943
600.

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